Keynes’ economic theories, emerging from socialist thinking in Britain, created a “tidal wave” that dominated the global economics profession, known as Keynesian economics.
Keynes’ “General Theory of Employment, Interest and Money” (1936) assumed “animal spirits” and inefficient financial markets, failing to recognize central banks’ role in causing economic problems.
Keynes’ investment experience, marked by poor performance in his first decade and substantial losses in the late 1920s, significantly influenced his economic mindset and theories.
Keynes’ investment philosophy evolved through trial and error, but his ego led him to blame the free market for his failures and advocate for socialist policies.
Keynes’ “technocratic socialism” and macro view of economics now dominate economic education and policy, largely eliminating the teaching of alternative economic thought, especially in graduate programs.
The rivalry between New York and San Francisco banks is a key factor in the current banking system, with New York banks regulated by the New York Fed and focused on lending, while San Francisco banks, regulated by the San Francisco Fed, are allegedly involved in money laundering for foreign interests.
The shadow banking system, comprised of offshore banks, is highly vulnerable to stress due to their high leverage and reliance on cheap US dollars, with a potential LIBOR blowout causing disproportionate impact on the US economy.
The Federal Reserve’s 50-basis point rate cut in August 2020 surprised markets, suggesting Powell prioritized the labor market over inflation despite CPI above target and unemployment not historically high.
Under the new Basel 3 endgame rules, investment banks will face massively higher reserve requirements compared to traditional banks, potentially benefiting European banks and disadvantaging American banks.
The SOFR (Secured Overnight Financing Rate) and LIBOR (London Interbank Offered Rate) are crucial for understanding Fed policy impact on dollar markets, with SOFR reflecting US repo market transactions and LIBOR based on offshore dollar markets.
The Federal Reserve under Janet Yellen allegedly implemented policies benefiting foreign interests, such as issuing short-term debt instead of long-term debt to finance Biden administration spending, despite an inverted yield curve.
The Deep State is purportedly behind both Trump and Harris in the upcoming election, with speculation that this could be the last election due to fundamental country problems.
The US fiscal policy has become unsustainable, with a debt-to-GDP ratio matching the post-WWII high of 216%, suggesting a potential return to the 2019 budget of $1.7 trillion as a solution.
The S&P 500 could reach 6,000-6,300 by year-end, supported by technical factors like the cup and handle breakout and Fibonacci extension.
Passive investing through 401K plans and pensions has created a $20 trillion force driving asset prices, making fundamental investing challenging.
The S&P 500 has a CAPE ratio of 35, the third highest in history, with a median of 15-17 since 2000, indicating elevated but not extreme valuations relative to recent norms.
The Fed’s 50 basis point rate cut in 2023 marks a policy pivot, but benefits may be delayed by economic slowdown and prolonged high interest rates.
Personal income and spending dropped 0.2% vs 0.4% expected in August, reflecting 70% of GDP and potentially weighing on inflationary pressures.
China’s massive stimulus package includes rate cuts, reserve requirement reductions, and an 800 billion yuan slush fund to rescue stocks, offering short-term positives but not addressing long-term growth issues.
Diversification across defensive stocks, growth stocks, bonds, energy, and precious metals reduces risk and allows for gains in various sectors.
Rebalancing portfolios by adding to strong sectors like Mega caps (e.g., Amazon, Micron) and energy after breakouts, while trimming weak sectors, is crucial for maintaining a well-diversified portfolio.
The S&P 500 has an 18% earnings growth outlook for 2023, with 97% coming from just 3 stocks (Microsoft, Nvidia, Google), indicating high concentration in a few large companies.
Interest rate cuts by the Fed, ECB, and China are positive for growth stocks and banks, potentially driving market performance in the near term.
The fiat currency experiment since the 1970s may end in the next 5-10 years due to unsustainable debt and currency creation, potentially leading to a crackup boom where people lose trust in currency and rush to buy real assets.
A commercial real estate bubble burst, driven by cheap money and remote work, could cause a bank crisis requiring a $3 trillion bailout, while the housing market may see a 20-40% drop in prices.
US government debt of $35 trillion is projected to reach $50 trillion, with annual interest costs hitting $2 trillion, potentially causing government insolvency and currency collapse.
Consumers maxed out on credit cards at 20-25% interest, carrying unaffordable debt, and with negative savings, may be broken by a recession, especially if jobs are lost.
The concentration of stock market gains in the top 10-35% of S&P 500 stocks, with just 7-10 stocks like Nvidia and Google driving the market up, increases the risk of a bubble burst.
Fed rate cuts often lead to 1-2 year stock market declines as the struggling economy becomes apparent, with multiple asset bubbles potentially deflating simultaneously over the next 2-3 years.
In a potential currency crisis, experts recommend moving finances from government bonds, bank stocks, and overvalued tech stocks into real assets like gold and silver.
Gold miners, particularly royalty/streaming companies, may outperform physical metals in a precious metals bull market, but require careful selection due to risks like government regulations and operational challenges.
In a recession, cyclical companies with fluctuating demand and high debt struggle, while consumer staples, utilities, and telecommunications remain stable due to continued spending on necessities.
Gold becomes a natural beneficiary during economic downturns, offering a low-risk asset that preserves value, especially during times of geopolitical uncertainty and concerns about global government debt levels.
Banks face challenges in recessions due to squeezed margins from lower interest rates, while commercial real estate struggles with vacant buildings and defaulting loans.
A CBDC reset could lead to a currency crisis, potentially causing holders of cash and bonds to lose out as the new digital currency limits personal wallet balances and possibly devalues existing debt.
CBDCs will force transactions into programmable digital wallets, limiting cash use and controlling purchases, potentially leading to hoarding restrictions and capital controls.
The level of government debt is deemed unsustainable by experts like Ben Bernanke, Janet Yellen, and Jerome Powell, who warn it could lead to a currency crisis and necessitate a reset.
In a CBDC reset scenario, the government may cancel debt by rendering old currency worthless, allowing companies to write off liabilities and restructure finances, potentially triggering an economic boom.
CBDCs could lead to hyperinflation as the government borrows from the central bank at a multiplier effect of 5-10, causing money to circulate faster and prices to rise rapidly.
Gold has gained $100 in 4-5 months with substantial percentage gains, while silver surpassed $32, creating potential buying opportunities during consolidation phases.
Lower-cost silver producers like Silver Wheaton and Pan American Silver maintain 50%+ margins, while higher-cost producers have larger potential margin increases due to thinner margins.
First Majestic’s acquisition of Gatos Silver at a 16% premium will create a company producing 30-32Moz silver equivalent at $18-20/oz with 50%+ silver revenue.
Aya Gold & Silver’s spinout of two gold projects in Morocco and Mauritania into MX Gold allows focus on silver and unlocks value for both entities.
Sierra Madre Gold & Silver’s Lara project, acquired from First Majestic, generated $2.4M since June 2022, with throughput rates growing to 350 tpd and targets of 400-500 tpd by end of 2022.
AbraSilver Corp. in Argentina benefits from favorable mining policies, with exciting drilling results including 31m @ 277g/t Ag and 53m @ 0.5g/t Ag.
The US faces three major economic bubbles: real estate at 104% of GDP, equities at 21 times earnings, and private credit with corporate debt at 104% of GDP, all at record highs.
A potential 40% drop in home prices and 45% drop in stocks could wipe out assets of the top 20% of consumers who own 68% of homes, triggering a severe recession.
The Fed’s 50 basis point rate cut in 2022 is unlikely to prevent a recession, as 22 years of negative real Fed funds rates have caused record debt and bubbles.
The yield curve inversion, with long-term yields lower than short-term yields, has historically signaled an imminent recession, except in 1965 and the 2001 dot-com bubble.
The shadow banking system of hedge funds and pension funds has issued risky debt, with collateralized loan obligations reaching unprecedented levels.
The Fed’s actions in 2020 and 2022, including buying trillions in corporate debt and mortgage-backed securities, were not authorized by the Federal Reserve Act of 1913.
Gold, as a monetary metal, has historically outperformed the S&P 500 for 25 years during inflation, deflation, and recession, serving as a lifeboat asset.
Smart money moves first in crises, leveraging resources and analysts to gather accurate information and protect portfolios before the general public becomes aware.
Former IMF Chief Economist Simon Johnson warned of a “quiet coup” where powerful financial elites captured the US government post-2008, taking excessive risks knowing they’d be bailed out and passing losses to taxpayers.
The US financial sector’s share of domestic corporate product increased from 16% in 1973-1985 to 41% in the early 2000s, as the economy became increasingly financialized.
The 2008 crisis stemmed from banks making trillions in risky loans to people with no income, assets, or credit, using lobbyists to secure bailouts by holding voters’ jobs hostage.
Johnson advocates for forced recognition of bank losses, followed by bankruptcy and new management with no bailout access as the only solution to the corrupt US financial system.
The odds of breaking up America’s mega banks are slim to none due to Washington corruption, likely leading to more existential financial crises, bailouts, and increased national debt.
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